Before abortion rights came into the national spotlight this week, student loans and competing proposals for dealing with the nearly $1.7 trillion in debt of more than 40 million Americans were at the top of the White House’s agenda. President Joe Biden appears to be warming to a plan to cancel at least some of his debt before the current loan payment hiatus ends in September — just weeks before the midterm elections.
Biden was never a big fan of using the presidency to cancel debt, but after that meeting with members of the Congressional Hispanic Caucus last week and facing plummeting approval ratings in an election year, reports suggest that action is coming. His press secretary and chief of staff have both said he will announce a plan, or extend the current payment pause again to have more time to make a decision.
Biden has already extended the break four times (former President Donald Trump gave the first break and then extended it twice), at a cost of about $200 billion worth savings, but pressure from liberal activists and Democratic legislators is mounting. Student loan experts told cafemadrid it’s important to use two frames to understand what kind of debt relief is coming: the amount that would be forgiven and who will receive that forgiveness.
Progressives want Biden to be big and push for maximum forgiveness with the lightest eligibility requirements. They say the stakes are high for Biden and his party, given the high probability that Democrats will lose control of Congress after this year’s election — in part because of the low turnout of Democratic voters in midterm elections and the lack of enthusiasm from activist young voters and other members of the party base.
The first scenario: Biden cancels up to $10,000 in student loans
This seems like a likely option. In the 2020 Democratic primary, Biden said he supported Congress’ move to eliminate up to $10,000 in student loans, while his rivals on the left called for more ambitious proposals. Reports suggest he’s since become more receptive to using executive measures to cancel federal loans, but he doesn’t seem likely to implement this option without some preconditions.
†[T]The goal, right, is to make sure it targets those who need help most,” White House press secretary Jen Psaki said last week. Government officials have debated those eligibility requirements, which include a means-tested limit using tax returns or paychecks (probably a $125,000 income limit), whether the institution a borrower attended was a public or private school, the type of loan taken out, and whether the loan was used for undergraduate or graduate studies.
The move would certainly provide relief and have forgiven debt for about 32 percent of borrowers, or about 13 million people, according to one analysis prepared for Senator Elizabeth Warren (D-MA) by scientists for the Roosevelt Institute, a progressive think tank. Two million black borrowers would see their debt forgiven, and of those borrowers who now owe more than they did when they took out a loan, this level of relief would zero the debt of 14 percent of those borrowers.
But the average student debt Americans have is about $30,000, meaning the vast majority of debt holders are still on the line for payments. Any amount of forgiveness is not popular with conservative numbers, and progressives like Rep. Alexandria Ocasio-Cortez (D-NY) argue that the figure wouldn’t make a meaningful difference to many people. And the $10,000 amount would cost roughly: $373 billion to roll out — about as much as the amount the federal government has spent in the past 20 years†
The second scenario: Biden cancels between $10,000 and $50,000 in student loans
This option seems a little less likely, but not ruled out. Biden has said he is looking at less than $50,000 in forgiveness per person, over what Warren and Senate Leader Chuck Schumer (D-NY) have demanded†
Biden probably wouldn’t go to the dollar cap here and would likely stick to the $125,000 income cap, experts told me. But any additional $10,000 in aid over the first $10,000 would mean huge disparities for the least affluent borrowers, according to the Roosevelt authors: “Every dollar of student debt forgiveness counts, but bigger is better for promoting racial equality and economic security.” .” Charlie Eaton, an assistant professor at UC Merced, and four other scientists are writing.
$20,000 in relief would erase the student debt of half of the borrowers, about 20 million people. Each additional $10,000 raise Results in nearly an additional 10 percent increase in debt-free borrowers. But that full $50,000 would cost about $1 trillion — more than has been spent on Pell Grants or housing aid since 2000 — and is lower. broad support among democrats, independents and young people† It would also probably worsen inflation somewhat, though not as much as full debt cancellation.
The third scenario: Biden cancels all student loans for everyone, or for borrowers with more than $50,000 in debt
This option has an extremely low chance of happening, not just because Biden has said more than that $50,000 of relief is off the table. The full $1.7 trillion price tag would be more than the federal government has spent on income tax or unemployment insurance since 2000, and would increase inflation by 0.1 to 0.5 percentage points over a 12-month period, according to the US Government. fiscally conservative Committee for a Responsible Federal Budget† Universal debt cancellation would also disproportionate benefit many of the wealthiest Americans, as more than half of the outstanding debt is owed by people with a graduate degrees†
Yet progressives are pushing for this option the hardest, and groups like the Student Debt Crisis Center are calling for the suspension of all admissions requirements or applications. Herein lies a tension: targeting relief goes a long way in making sure the lowest-income borrowers get most of the aid, but the Department of Education doesn’t have the resources to conduct a massive screening exercise. implement to assess applications. Right now, the ministry is already struggling to implement smaller, targeted relief efforts that the Biden administration has already rolled out, according to Adam Minsky, an independent student debt attorney.
“Even though it is quite wide [requirements]there are many legitimate concerns that some sort of resource testing or other eligibility limiting mechanisms could be a huge administrative problem,” he said. “The Department of Education is already stuck trying to push through all these changes quickly. and you’re going to add something to that that could potentially affect millions and millions of borrowers.”
Inaction seems unlikely, but each of these moves is a political gamble. While some kind of relief gauges well, it is not the biggest concern of most voters. Like David Frum of the Atlantic has writtenForgiving student loans risks being viewed as “a voter tax that the Democratic Party needs most to get back,” college-educated and working-class Americans, while also undermining efforts to fighting inflation slows and only some of his party’s most progressive members leave happy.
Regardless of which path is chosen, Natalia Abrams, the president of the Student Debt Crisis Center, told me that progressives will have won at least one battle. The president’s legal authority to waive student debt is an open question, but “if this happens, President Biden will agree that the president and the Department of Education have the authority to waive student debt,” Abram said. “We can keep pushing for more. We agree that this is leverage and if they can cancel $10,000 they can cancel $50,000. And then they can cancel it all.”